Blain’s Morning Porridge, October 4th 2024: Sportainment – The Future of Commercialising Content and Digital Wealth!
“Disruption is often just rethinking the obvious to deliver the product in a simpler way to achieve a better outcome for all concerned.”
Sports Investment has become one of the hottest arenas in Alternative Asset markets. However, there are more opportunities than simply buying teams, leagues or stadiums – the value of content is critical, creating a whole new Asset Class: Digital Wealth – the value of Creator IP. How to monetise it?
Digital Wealth Management – Realising the Value of Fans and Content for Creators
If you want to get really wealthy then announce you are the next AI tech-messiah. If you lack such Gallus Chutzpah (two minority idioms for the price of one; Scots and Jewish), then gambling on which one of the multiple AI firms might emerge on top is another approach – but not without risk.
I have a better idea. Take a look at the rapidly evolving Sportainment sector.
Even I, a dour, strictly rational Scot in the mould of Adam Smith in my economic orthodoxies, get excited about Sports. My particular passion is Sailing. Later today, (Friday Oct 4th) and weather permitting, Team GBR might win the Louis Vuitton Cup in Barcelona, meaning Ineos Britannia and Sir Ben Ainslie will take on the Kiwis in the America’s Cup next week. (They are 6-4 up, 2 Championship points away from victory in the first to 7 series.) I have declined a critical business meeting later today that could make my future to watch the racing.
Every single advertiser on the planet should want to know about my sailing weakness if they want a share of my wallet. It would be in their interest to pay for that data. They should know that inevitably I will purchase a model of the boat, wear the t-shirt, buy the sunglasses, sport the hoody (no matter how daft I look in it), read the books, and if there is a pie, I shall most assuredly eat it. (My son has much the same problem with everything Arsenal related – 30 years old and still sleeps under an Arsenal FC duvet cover. His partner is very understanding.)
When you are a fan, then the sport, your players and your team are tangible, and very real. Same with Art (where I will sacrifice a day to see the new Van Goug expedition), or paying immense sums to see a favourite band. Even I can understand the appeal – although I do struggle with changing rules in Rugby. Sport and Fandom is “real” world. Real world has real value.
From the perspective of markets, the fact 56 of the rich folk on the Forbes 400 list of US billionaires own sporting franchises is interesting. That the richest 20 owners of US sports teams have seen an incremental $122 bln of value over the past year from their sporting assets – is fascinating! Forbes cites a 2200% surge in the value of NBA teams over 25 years. Smart money sees the value embedded in Sports is fantabulous. It’s no wonder every billionaire’s family office, and every single Alternatives focused hedge fund, is now fixated on the value of sports and how to invest.
The most successful investor in Sports is probably Liberty Media. It’s an extraordinary firm. Under their ownership Formula 1 has been transformed, turning what had become a tired, processional parade of indistinguishable racing cars controlled by an “interesting”, (in all the wrong senses of the word), ownership structure into something vibrant, exciting, and heroic that fans just can’t get enough of.
They’ve turned F1 into one of the most engageable “leagues” on the planet. They’ve even cracked the US market. It’s partly on the back of the success of “Drive to Survive”, the Netflix show that’s reinvigorated fan interest – giving them a soap-opera about the teams, the drivers, the managers and the sport. It illustrates not just value of a successful sports franchise, but the critical importance of “content” and how to drive fanbase engagement and ultimately the value of these fans. I stopped watching Grand Prix’s decades ago, bored by it. Now I’m back in and consume the websites for information – I bought some books and a model car and now my inbox is full.
The confidence in Liberty Media, and the value of the fans, is shown by the $1 bln 10-year sponsorship deal they’ve just sighed with Louis Vuitton earlier this week. The Arnaud family gets to put its’ LVMH brands at the front of F1. Rolex is out – TAG Hauer is in. Moet replaces Prosecco. The family realise 40% of F1 fans are now women. They expect massive upside, and lots and lots and lots of product placement – including in Drive to Survive. LVMH’s head office are acutely aware they need to constantly broaden and democratise their brand appeal while keeping it distinctly upmarket. (Do they want to sponsor the Porridge?)
(How things change; many years ago, when I was just an MD of a global investment bank, I tried to persuade the bank’s board to sponsor the Cowes Week Regatta, then the world’s largest sailing amateur sailing event. What’s not to like about direct access to 10,000+ moderately wealthy sailors with high disposable incomes? They declined. Partly because they thought sailing is too elitist – it is not – but mostly because a photo of the bank’s logoed-up yacht on its’ side, aground on a bar, appeared in the papers under the headline: “World’s Local Bank Aground on the World’s Local Sand Bank”. They squandered the sponsorship money on Golf instead – because golf is a more powerful expression of middle-class aspirational success and ambition in bad knitwear than a beautiful, fast, racing yacht? (US Readers: Dripping Sarcasm Alert.))
Read on: I have a plan and an opportunity in Sportainment.
The smarter investors realise the factors that make sports teams, leagues and players so alluring and cash generative can equally be applied across a whole wide spectrum of bands, popstars, athletes, and cultural icons (note my comment last week about spin-doctor Alasdair Campbell and politico Rory Stewart filling London’s O2 arena faster than any band with the Rest is Politics podcast!). It can apply to leagues and authors. They are all creators and what they create has value. Increasing the value of all that content is a maximisation play. Hence the new asset class of Digital Wealth – the value of content.
All successful creators have fan bases, and fans are monetizable – the problem is how and at what cost. Fans can be encouraged to join loyalty programmes and rewarded with watch and engage to earn upside tokens. They can be addressed through multiple media; video, audio, the metaverse. They need to get as much out of the relationship as a fan, as the star does – its mutual. The issue is how to commercialise the fan base at a cost that makes sense and leaves everyone feeling better off.
What if the opportunity to create the Netflix of Sportainment existed? It does – it’s about the infrastructure to commercialise content.
That’s a discussion I’ve been having with a very smart tech entrepreneur over a number of years. He first saw the value of digital content long before the chaotic emergence of the Non-Fungible Token market. My chum spotted how that (sort-of) worked and its flaws, and recognised the concept had a much wider applicability. He saw how fan engagement and commercialisation needs to become a simple repeatable process to achieve the necessary economies to do it at scale for the maximum number of creators. Its social media evolved – and far more complex.
He’s invested time in automating the replicability of the engagement process right through from client KYC and AML, to creating D2C (Direct to Consumer) apps and using FAST channels (Free-Ad supported TV), through the SaaS (Service as a Service) platform its created. He’s built a team of highly experienced professionals to create, manage, distribute and commercialise the “Digital Wealth” embedded in the creator content of the clients that are signing up.
It all sounds simple and obvious, but its layered and complex. It requires licensing the distribution and constructing a robust legal system around the IP (intellectual property). (It’s worth remembering the critical moment for Spotify was not condensing music into a stream-able format, but making it legal to do so!)
One lightbulb moment was the realisation of how blockchain, tokenisation and smart-contracts would enable the process and make it accessible for clients and fans to become involved. (I’ve long struggled with Blockchain as a solution in search of a problem – but here it works.) Tokenisation becomes an effective route to create and fund the structure that’s emerges, offering investors a simple route to ownership and participation. It will result in an ecosystem of opportunities for creators, shareholders and fans to invest directly in content revenues within the entity and to spend outside – and how it is being done in a fully regulated format and environment.
While I remain a sceptic on speculative unanchored crypto – like Bitcoin – the tokenisation of RWAs (Real World Assets), and the use of stable coins within an ecosytem is much more interesting. The stable and utility coins around this project will represent interest in the firm and the content within, effectively backed by the revenues and value. Again, this is tangible and real De-Fi, rather than asking investors to believe in the mumbo-jumbo of Satoshi’s divine bitcoin munificence.
Creating the infrastructure around Digital Wealth Management, and demonstrating its value to the creators, has taken my client years – but we are now close to the public launch next year. We’re now in private funding mode, a first-round financing – targeting “friends and family” from the supporters and partners that have nurtured it thus far, and an institutional round from HNW, Family Offices and Institutional Investors in sports. (If you are intrigued, let’s have a chat – but at this stage it is very much a professional investor conversation only.)
This year I’m not surprised to have seen a number of Venture Capital opportunities to invest in early-stage Fan Engagement Solutions cross my desk. It’s a market opportunity many will seek to fill. The deal I’m working on has “first mover advantage” and is “product complete and launch ready”. The project will revolutionise content, digital wealth and fan engagement. Miss it at your peril.
Meanwhile… With 10,000+ subscribers, (although most of you are too mean to pay the monthly subscription, preferring the free, limited option) even The Morning Porridge is (sort of) creative and has a fan base. Can I commercialise it? I spoke to the professionals and listened to some friends. That’s why I am currently writing a book about Markets, Politics and Economics, and planning to relaunch the podcast. They explained: content, content and content is everything in multiple formats.
Out of time, have a great weekend, and don’t bother calling after 1 pm as I will be watching the sailing…. (if there is enough wind in Barcelona..)
Bill Blain
Author of the Morning Porridge, founder of Wind Shift Capital
